The Top 5 Reasons People Start New Businesses

Starting a business is a daunting proposition. Even for veteran entrepreneurs it’s not that easy, although it does get easier.

But if there weren’t any reasons to do it, there’d be no new businesses. And since small business is the lifeblood for much of the economy, it’s clear that people do start new businesses all the time.

Let’s look at some stats from SCORE - Counselors to America’s Small Business:

• There are an estimated 25.8 million small businesses in the United States. That insignificant looking “.8″ is 800,000!
• Those businesses have generated 60-80% of net new jobs in the last decade.
• Those businesses represent about 97% of exporters of all goods.

People are jumping on the bandwagon and starting new businesses. Why are they doing it?

Here are the top 5 reasons people start new businesses:

5. Personal Freedom. People look at the opportunity of not being shackled to a job. No more 9 to 5 daily routine. No more daily grind. No more boss! In all cases they could be very wrong. Starting a new business is typically more work, longer hours, and your boss is the worst one of all, you. No one will push you harder, demand more of you, and be tougher on you than you. I don’t care if your boss was in your face daily screaming obscenities. You’re still going to be tougher on yourself.

Having said that, there is an amount of personal freedom associated with starting a new business that can be wonderful. It can involve flexible hours, being able to set your own priorities (which should include things outside work as well!), deciding how much workload to take on, etc.

4. Personal Development. Many entrepreneurs feel stymied and suffocated at work. They’re not growing as people. Starting a new business will absolutely expand your horizons. You’ll have to learn an insane amount (most of which will be stuff outside your existing realm of expertise / comfort zone), you’ll grow immensely as a business person and human being.

The only caveat is this: If personal development is truly important to you, don’t let it slip away. It can happen easily. You get too busy, too stressed, too caught up in the minutae of running a business. Suddenly you’ve sacrificed your own personal growth. Be careful.

3. Ego. Many entrepreneurs have a healthy ego. You’ll need it. You might even need a slightly unhealthy ego to drive yourself day in and day out to succeed. No matter how great or small your ego you can succeed; but recognizing your own value and the value of your work will improve your success.

Ego drives people to say, “I can do this better than so-and-so.” Often, people realize they can do a better job with what they’re already doing as an employee, but on their own.

Ego drives people to start new businesses and it also gets fed by success. There’s an ego-loop which is essential to success.

2. Money. Ah…good old money. People start new businesses to make money. Many people think they can make more money as entrepreneurs. I just came across a great blog by Steve Olson. In a recent post 10 Things I Wish I Had Never Believed he writes:

Getting a good job is the best way to earn money
Ask any entrepreneur if she’d like to quit and get a job. Then ask most people with a job if they’d like to quit and work for themselves. Most wealthy people will tell you a job is the worst way to make money.

There’s no question that a very small percentage of uber-successful entrepreneurs make more money with their businesses than they would as employees. But is that really the case for everyone?

Rob over at Businesspundit says this:

The truth is that you are likely to make less money over your career as an entrepreneur than you would in the corporate world. Research shows that only the top quartile of entrepreneurs make more wages than their corporate employed counterparts. That means 75% of entrepreneurs would be better off financially with a regular job. You could counter by saying that wages may suffer but you can build wealth through your business, but you would be wrong again. The majority of entrepreneurs have $20,000 or less in business equity, and 30% of them have zero business equity. Surprising?

Not everyone starting a new business is chasing tons of money. A stay-at-home mom or dad trying to earn some income on the side isn’t looking to hit a gold mine, they’re looking to put a bit more money in their pocket. So money is an obvious motivation but uncountable wealth is not. Still, many people do chase big, big dollars (and I fully support that!) but just keep the odds in mind.

1. Passion. The #1 reason why people start new businesses, and the #1 reason why people should start new businesses is PASSION. Passion baby! Gggrrr…

Entrepreneurs are a more passionate crowd than non-entrepreneurs. Perhaps it’s a common thread that unites all entrepreneurs, who can be so wildly different in other character traits, goals, etc.

If passion is what wakes you up in the morning, gives you a bigger jolt than a cup of oil-thick coffee, and keeps you awake at night with excitement for the next day … you’re an entrepreneur. You should look at starting a new business. Passion leads to everything else - personal freedom, personal development, ego and money. Without passion you’ll be hard pressed to succeed. If you’re really, really, really passionate I might just put money on your horse.